Technology's haves and have nots

Traditional credit card terminals like this one could see competition from Square, a new technology that simplifies electronic transactions for small businesses. - Pascal Le Segretain/Getty Images

Kai Ryssdal: We've got a whiz-bang new website here at Marketplace. We're on Twitter and Facebook and all the rest -- you kind of have to be these days. Big consumer products companies have digital strategy types constantly studying buying patterns and pumping out streams of online deals.

But you go to the other end of the spectrum, and a lot of businesses are still operating in a nearly technology-free zone. The quirky retailer, the fledgling bakery, are often on the wrong side of the digital divide, as Marketplace's Steve Henn reports.

Steve Henn: Miki Nishihata started Hello Bicycle three years ago, almost by accident.

Miki Nishihata: It started out as a hobby with barely anything going, then it grew to be fairly well known in Seattle. We have a lot of customers now and things are going well for us.

When Nishihata needs to straighten a spoke, mend a chain or change a flat, he knows exactly right the tool to reach for. But until recently, when it came to using technology to build his business, he felt like he like he was banging rocks together -- hoping for a spark.

Nishihata: Small businesses are hurting for technology because most of us live in the Stone Age.

There are tons of stats about the digital divide for small businesses in this country and they are not good.

Rieva Lesonsky: We've always heard that about 50 percent of small businesses don't even have websites.

Rieva Lesonsky is a small business consultant.

Lesonsky: When someone is looking for something -- whether it's local or national -- they are going online to find it and if you don't have a website, you are not going to be found.

For many businesses, even basic technology can be a struggle. Millions of small businesspeople still aren't set up to accept credit cards. But Nishihata says figuring out how to take plastic was a hassle.

Nishihata: Credit card processing requires a dedicated phone line.

You need a special account with a bank.

Nishihata: Then you need to get a machine.

There were set up costs.

Nishihata: The learning curve was kind of high.

There's a waiting period. So for its first year, Hello Bicycle took only cash.

Sales suffered. But Lesonsky says there are lots of cheap, even free, technologies out there that can make things easier if store owners experiment a bit. Hello Bicycle eventually started using a credit card system called Square.

Nishihata: Because it's just so simple. It's exceedingly simple for what it does. You basically get a device. It's about the size of a quarter -- except it is square like the name -- and you plug in the phone jack of an android or iPhone and using their app, you just swipe a card through it.

Customers sign the phone with their finger. Jack Dorsey who help create Twitter co-founded Square a few years ago because he thought getting set up to take plastic was just too complicated.

Jack Dorsey: So the idea behind Square is what can we do to get the entire process down to a download?

Now credit cards account for 90 percent of Hello Bicycle's sales and Nishihata's business has tripled. Other sites make it incredibly easy to for local shops to post their inventory and prices online.

Jack Abraham: Milo will actually search the inventory systems of stores near you in real time and tell you which stores have that product that you are looking for, so you can go in and buy it today.

Milo lets local shops compete with the online giants by getting their goods on mobile phones and computers screens and in front of thousands of potential customers.

Lesonsky says small businesspeople have to embrace technology like this if they want to survive -- even if they're intimidated.

Lesonsky: If, you know, you feel like "Oh, that technology." You know, round up a neighborhood kid, they can do it for you. It's that simple.

Today in Silicon Valley, it's never been easier or cheaper to launch a startup. New websites don't need big servers anymore -- they rent rack space in the cloud. Entrepreneurs use technology to outsource everything they can. They're ruthlessly efficient.

Lesonsky say mom and pop shops should take note. And remember, successful entrepreneurs were once small businesspeople too. Even guys like Jack Abraham.

Abraham: Yup, we slept on aero beds and lived out of office.

But last year, Jack Abraham sold Milo to Ebay for tens of millions of dollars.

In Silicon Valley, I'm Steve Henn for Marketplace.

Steve Henn

Steve Henn was Marketplace’s technology and innovation reporter until December 2011. He filed stories for the entire Marketplace portfolio. In addition, Henn occasionally acted as the back-up host for Marketplace Tech Report.